The summer is just around the corner and like most, you're probably dreaming of a deserved week or two (or three) away.
But, even if you're the savviest of travellers, holidays don't come cheap. The initial upfront costs of booking can often be more than we can spare out of a month's paycheque.
So we've taken a look at the different options available to pay for your fun in the sun, allowing you to decide whether using credit, a payment plan or sticking to your savings is the best for you.
Using a 0% purchase credit card
0% purchase credit cards allow you to spread the cost of your purchases over a period of up to 30 months at zero interest. This means that you can pay a small portion of your holiday cost each month until you've fully paid it off.
As well as allowing you to spread the cost, credit cards can have a number of other advantages too. They typically come with free payment protection for any purchases costing between £100 and £30,000. This means you get a full refund from your credit card provider should something happen, like your hotel going out of business.
Some providers also offer additional perks, including cashback and rewards. But just make sure to read the fine print, as some providers only offer cashback or rewards for specific things.
But if you do opt to use your credit card, it's important that you can still afford the monthly repayments. Otherwise, any late or missed payments could damage your.
Taking out a personal loan
Whether from a bank or alternative loan provider there are now plenty of personal loan options to choose from. By taking this approach, you might be able to find a suitable low-interest loan that will help you spread the cost of your getaway. But this option is always going to be more expensive.
A loan could make funding your holiday easier, as it can be much more manageable to split your repayments into fixed monthly sums over a longer period. This helps you to budget and break the cost down. But it's crucial that you work out what you can actually afford before you apply. You should see the loan as a way of spreading the cost, not a way to fund a holiday you can't afford. But if you stick to your repayments you could even boost your credit score, which may lead to being approved for mortgages, loans and much more in the future.
A loan normally comes with interest, and these rates can often be pretty high. This makes repayments more expensive and means in the long run, you're paying more overall. Make sure you are able to repay more than you borrowed before you take out a personal loan.
It's always important to shop around for a loan by looking at different lenders to get a low-interest rate and a flexible repayment period. If you do have disposable income though, it always makes more financial sense to use your own money than to get a loan.
A holiday payment plan
Holiday companies like Thomas Cook and Teletext Holidays offer payment plans to secure your time away. With this option, you pay an upfront deposit and then make monthly payments. But there are some important things to be aware of...
This type of payment plan is usually only available for selected holidays, which limits your options. Make sure that you are fully aware of the repayment terms. Typically the holiday company will set up a direct debit, meaning the amount be taken straight from your account. Make a note in your calendar to remind you of when the instalments are due and how much they are to make sure you are covered. This will help you avoid any missed payment penalty charges.
Using your savings
Using your savings ensures that you spend only what you can afford, and is typically the best option for most people. We're not talking about dipping into your emergency fund here, but using money you've saved for this specific purpose, gives you the peace of mind that you are only spending what you can afford. It also means that you won't encounter any future surprises, and aren't putting yourself at risk of running up debts.
But a holiday that is paid for with your debit card often requires a savings plan first. Learning how to, and is a good first step. If you plan your holiday in advance this can also help you spread the cost without relying on credit. For example, you could book the flights one month, and then when you next get paid, book your accommodation.
The main benefit of paying exclusively with your debit card is that you don’t have to worry about making repayments later down the line. Depending on your income and savings though, it will probably restrict the type of holiday that you can pay for. If this is the case and your heart is set on a more extravagant holiday (or you have to fly to Barbados for your cousin's wedding), you could combine your debit card with another source of finance, such as a 0% purchase credit card. And by starting an effective budgeting and savings plan, you will hopefully be able to use just your debit card for future jaunts abroad.